Applicability of Cost Volume Profit with sample calculations

Value costing remains an important aspect of strategic business decisions. It allows decision-makers a rapid snapshot of optimal output levels with respect to variable costs, price-point, and profitability. While CVP makes several assumptions that limit its application to specifics, it remains an important part of accounting for decision-makers. (969 words, APA format, with references).

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INTRODUCTION-COST-VOLUME-PROFIT
Value costing will always be relevant to business enterprises. Simply put, it is a powerful management tool to address a problem common to every enterprise-how to sync up each element toward the common goal. "The mismatch between strategies and tactics... with the overall goals and objectives of the organization trigger most of the non-value adding activities in operations," (Gupta & Gunasekaran, 2005, pg.338). Value costing strips costs and value of window dressing, and lays objective data bare for consideration. Thankfully for the professional accountants among readers, there is no single answer for the 'correct' method, however. While simplicity is the strength of Cost-Volume-Profit (CVP) techniques, it also is its limitation.
There must always be a balance between resources and quality in any enterprise. While this may sound obvious, it strikes to the crux of CVP's usefulness. If accounting techniques are considered a spectrum, with infinitely expensive (as measured in time or money) and infinitely accurate on the right side-and free (again, as measured in time or money) but grossly over generalized at the left-CVP would lay on the left side of the spectrum, providing quick, simple information for decision making.

CONTRIBUTION MARGIN
First, consider the concept of contribution margin (CM). Unit contribution margin is defined by the difference between revenue (R) and variable costs (VC)-where variable costs consist of whatever input per unit is required to prepare it for sale (Vakkur):
R-VC= CM (in dollars, per unit or gross) or VC/R ...

Solution Summary

The future applicability of CVP (Cost, Volume, Profit) analysis is discussed. Sample calculations are included to illustrate CVP's continued usefulness in strategic accounting.

Please help with the following calculations. '
1) If the sales price per unit is $100, the unit variable cost is $75 and total fixed cost are $150,000 then the break even volume in dollar sales is?
2) Company produce dolls. Each doll sells for $20.00. Variable cost is per unit total is $14.00 of which is direct material and

Forms, Inc. wants to sell a sufficient quantity of products to earn a profit of $40,000. If the unit sales price is $10, unit variable cost is $8, and total fixed costs are $80,000, how many units must be sold?
A) 60,000 units
B) 40,000 units
C) 15,000 units
D) 600,000 units

Managers often make decisions about keeping or dropping a product after evaluating the probability of each product in the product line. Bimini Products Inc., recently completed an activity-based costing study. Management wished to compare the results with the cost data produced by their traditional cost system. Product data a

16. Item A sells for $5. Fixed costs per unit are $1, and variable costs per unit are $3. The contribution margin ratio for item A is 20%.
a. True
b. False
17. Which of the following average costs per unit may be expected to decrease by the greatest percentage with an increase in the volume of units produced?
a. Average fi

Explain cost-volume-profit analysis, including an explanation of the calculation and the components. In what three ways can the contribution margin be useful in cost-volume-profit analysis? What does the term break-even point mean? Name the two ways it can be measured.

The Houston Armadillos, a minor-league baseball team, play their weekly games in a small stadium just outside Houston. The stadium holds 10,000 people and tickets sell for $10 each. The franchise owner estimates that the team's annual fixed expenses are $180,000, and the variable expense per ticket sold is $1. (In the following

1)If you have a population that has a small sample, but does not meet all of the criteria for the nonparametric test how can you tell what test to use?
2)How might one know if a samples follow a normal distribution?
Please explain each in roughly 100 words please

Thompson Company is considering the development of two products: no. 65 or no. 66. Manufacturing cost information follows.
No. 65 No. 66
Annual fixed costs $220,000 $340,000
Variable cost per unit 33 25
Regardless of wh

One more limitation of cost-volume-profit analysis is that it assumes that fixed costs are unlikely to stay constant as output increases beyond a certain range of activity. Security and lighting for instance may be regarded as fixed costs at some point but as production increases there may be need to light up and guard additiona

1. Why does multiple product cost-volume-profit analysis often assume a constant product mix?
2. A manager in your organization just received a special order at a price that is "below cost." The manager points to the document and says, "These are the kinds of orders that will get you in trouble. Every sale must bear its share o